The U.S. Internal Revenue Service delayed the start of the tax-filing season for one to two weeks, citing the recent 16-day federal government shutdown.
The IRS, which had planned to open filing Jan. 21, 2014, will now begin accepting returns for tax year 2013 no earlier than Jan. 28. The agency will make a final decision on the date in December. The delay won’t alter the April 15 deadline for taxpayers to file their returns or seek extensions.
“Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right,” Danny Werfel, the acting IRS commissioner, said in a statement yesterday.
The change will have the biggest effects for taxpayers who file as soon as possible to obtain their refunds and tax-preparation companies including H&R Block Inc. (HRB:US), the nation’s largest preparer.
At the start of the filing season, the IRS largely sends refunds. This year, the IRS issued $135 billion in refunds from Jan. 30 to March 1. That’s more than was paid from March 2 to May 10, when the agency received 50 percent more returns.
In the first month, refunds averaged $2,944, compared with $2,651 for the entire filing season through May 10.
“While H&R Block is well prepared to adjust to the IRS announcement of a delay in the opening of the 2014 tax season, we are frustrated for our clients who are among the estimated 18 million taxpayers who typically file a return in January,” Gene King, an H&R Block spokesman, said in a statement.
H&R Block, based in Kansas City, Missouri, prepared about 16 percent of U.S. individual tax returns in 2013, according to a company securities filing (HRB:US).
This is the second year in a row that the IRS has postponed the filing season. Returns for 2012 were accepted starting on Jan. 30 after Congress delayed setting some tax policies.
In a letter to Werfel today, House Ways and Means Committee Chairman Dave Camp questioned the agency’s decisions to announce a delay so early and deem some technology employees working on the health-care law’s sign-up exempt from furloughs during the shutdown.
“It appears the IRS chose to ignore its responsibility to be prepared to process nearly 150 million returns and to delay the tax refunds of potentially millions of Americans,” Camp, a Michigan Republican, wrote.
The IRS furloughed more than 90 percent of its employees during the shutdown, which began Oct. 1 when Congress was unable to pass a spending bill and ended after midnight Oct. 17.
The IRS said in yesterday’s statement that it’s experiencing “heavy demand” on its toll-free telephone lines and that it was working through 400,000 pieces of correspondence that came in while offices were closed.
“This backlog of work hurts victims of identity theft, taxpayers trying to be compliant but awaiting responses, businesses that rely on the IRS for a host of services and, now, taxpayers who will have to wait longer for their refunds,” Colleen Kelley, president of the National Treasury Employees Union, said in a statement. The union represents IRS workers.
Representative Sander Levin of Michigan, the top Democrat on the Ways and Means Committee, said in a statement that the delay “adds insult to injury” for taxpayers.
“This is yet another unfortunate effect of a shutdown that Republicans should have never caused,” Levin said in a statement.
Delaying refunds could have an additional consequence in 2014. The U.S. debt limit is suspended through Feb. 7, and changes in the government’s projected spending after that date will affect the timing of how long the Treasury Department’s extraordinary measures to prevent a default will last.
Because the government may issue more refunds after Feb. 7 than previously anticipated, a potential lapse in borrowing authority could come a few days sooner than projected, said Loren Adler, research director at the Committee for a Responsible Federal Budget in Washington.
The delayed start of tax-filing season probably will create a backlog of potential returns for the start date, rather than delaying all returns equally.
“Those are folks who are trying to do this as soon as their books are in order,” Adler said.
The Bipartisan Policy Center projects that the U.S. will run out of borrowing authority between the end of February and mid-March 2014.
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